Software company accuses Ford of trade secret theft

Versata says Ford used its trade secrets to develop its own product development software

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Versata attorney Larry Davis talks to the media during a press conference in a room at the Westin Hotel in Southfield, Michigan on Thursday, July 16, 2015.
Davis talked about Ford Motor Company allegedly lying about trade secrets and stealing his company's technology in the mid 2000's.
Davis say that Ford saved at least $1 billion by using Versata's ACM technology to "reduce recall and warranty expenses, to accelerate product development and to streamline the ordering process" according to a key facts handout they gave to the media.(Photo: Eric Seals, Eric Seals/Detroit Free Press)Buy Photo

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Texas software company Versata says Ford used its intellectual property

Davis talked about a meeting of Ford and Versata executives on Dec. 19, 2014. Versata was negotiating a five-year contract extension with 13% annual increases. Ford balked, demanding the price remain at $8.45 million a year. When a deal fell through, Ford said it planned to terminate the contract at the end of 2014, which it did.

Versata says it learned in February that Ford had developed its own version of the software and believes some of its trade secrets are in the new Ford program. The software is designed to speed product development by making sure all the parts in a planned vehicle are compatible.

Versata filed its suit in Texas on May 7 and wants an injunction against Ford and its employees from infringing on its patents and from using its software. It also wants its software returned and seeks damages including costs and legal fees.

Versata alleges that Ford's in-house system was developed by reverse-engineering the software company's proprietary system and then using some of the same code.

"We are in a serious dispute with Ford," said Michael Richards, president of the global automotive division of Trilogy, parent company of Versata. Prior to the press conference he told the Free Press that some of Versata's protected trade secrets are included in Ford's patents. "We believe we've identified at least three areas where our trade secrets were copied into their patent, and I think we will find more," Richards said.

"We identified at least 15 people who worked on both sides of the wall," Richards said.

Versata learned about the new software when Ford filed a federal lawsuit in Michigan, asking the court to confirm its version of software did not infringe on Versata's intellectual property. That suit is still pending.

Ford said in its statement that the Versata lawsuit was retaliation for Ford filing its lawsuit.

"Versata's Texas case is a retaliatory attempt to avoid the lawsuit in Michigan, where Ford's software was developed and used. Ford will move to dismiss or transfer the Texas case to Michigan."

Versata executives say they also learned that Ford had a team working on the project since 2010, filed a patent application on its software in October 2011 and received a patent in August.

Versata first provided software to Ford in 1998 and other customers include General Motors, Nissan, Fiat Chrysler, Toyota, Hyundai, Kia, Volvo and Jaguar. The software was updated over the years, Richards said. In 2004, it underwent an upgrade and the companies signed new agreements.

Richards said this is a medium-sized contract for the supplier, which has not had problems with Ford in the past. It represents about a third of Versata's business with Ford and while the supplier has no issues with other departments at Ford, he does not know what impact the lawsuit will have on other ongoing agreements.

Davis said the case could take a year or two before it goes to trial. If the case proceeds in Texas, the tentative time frame is a trial date around September 2017, he said.

Because Ford de-commissioned its use of the supplier's software, Versata has the right to verify that its intellectual property has been fully removed and not been copied, Richards said. But Ford has refused Versata access so the supplier cannot properly assess whether the new Ford system is based on Versata's, Richards said.

In the end, it is a court that will decide how similar the two programs are, Davis said. Patent offices do not have the resources to adjudicate every submission and trust that the applicant has disclosed knowledge of past patents. "We think they lied, covered it up, and defrauded the patent office," Davis said.

Also to be settled is whether the case will proceed in Texas, which Versata wants, or Michigan, where Ford hopes to have it heard. The venue could be decided this fall.